Chinese investment in Vietnam surges

By Minh Son, Hung Le   December 2, 2019 | 08:01 pm PT
Chinese investment in Vietnam surges
Labourers work at a foreign-invested car factory in Hai Duong Province, northern Vietnam. Photo by Reuters/Kham.
Pledged FDI from China reached $2.28 billion between January and November, nearly double that of the same period last year.

The FDI from China this year far exceeded that of previous years, which stood at $1.22 billion, $1.41 billion, and $1.26 billion respectively in 2018, 2017 and 2016, according to General Statistics Office (GSO) reports.

China proved the second biggest investor in Vietnam, accounting for 15.5 percent of total registered FDI in the first 11 months of this year, trailing only South Korea with $2.91 billion, or 19.8 percent.

Total registered FDI in Vietnam between January and November fell by 7 percent year-on-year, to $14.7 billion.

Reports by various consultancies have cited U.S.-China trade tensions as a key driver behind an investment shift to Vietnam, which boasts one of the highest GDP growth rates in Southeast Asia alongside low inflation.

Vietnam forecasts its GDP to grow by 6.8 percent this year and plans to sustain it next year by increasing exports and controlling inflation, according to a report the govenment sent to the National Assembly in October. The country’s January-September GDP expanded at 6.98 percent, the highest in nine years.

But this is not the only reason, as before the trade war begun in 2018, China had been tightening its environmental policies so wanted to relocate its cheap and polluting industries to other countries in the region, according to a November report by SSI Research, the macro research arm of Saigon Securities Inc.

Nguyen Duc Thanh, head of the Institute of Economic and Policy Research under the Hanoi National University, said China is currently trying to replace its cheap industries, which consume loads of energy and pollute the environment, with high-tech equivalents under its "Made in China 2025" plan.

As a result, China is looking to shift labor-intensive industries, which depend on cheap labor to be competitive and are harmful to the environment, overseas, and Vietnam is very likely one of the venues, he added.

According to GSO, China ranks third in terms of historical FDI in Vietnam, totaling $15.8 billion. South Korea ranks first, with $66 billion, followed by Japan with $59 billion.

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